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APRIL 8, 2007
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Mobile Security
Today, it is all about information and how the right information is sent to the right people at the right time and right place. Uncertainty about how to secure mobile phones in the face of increasing threats is slowing individual adoption of mobile applications. There are many facets of mobile security, including network intrusion, mobile viruses, spam and mobile phishing. Analysts expect big telecom companies to develop security solutions on various security platforms.

Rough Ride
These are competitive times for the Indian aviation industry. As salaries zoom, players are scrambling to find profits. Even the state-owned Indian is now seeking young airhostesses to take on the competition. It is planning to introduce a voluntary retirement scheme for airhostesses above 40 years. On an average, they draw a salary of Rs 5 lakh a year. The salaries of pilots, too, are soaring. According to industry estimates, the country needs over 3,000 pilots over the next five years.
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Business Today,  March 25, 2007

Bucks for Beans
Sivasankaran sells his coffee business.
Sterling’s Sivasankaran: What next?
His reputation for buying companies and selling them is legendary. Over the years, C. Sivasankaran, founder of the Sterling Group, picked up a cellular telecom business from the RPG Group and eventually offloaded it on Maxis of Singapore; sold his broadband business to VSNL, and divested 33 per cent in Tamilnad Mercantile Bank. Last fortnight, Sivasankaran lived up to his reputation by selling the coffee business of the Sterling Group, comprising Fresh & Honest Café (which focusses on vending filter coffee and other beverages) and Barista (a coffee shop format). The deal size is pegged at $125 million (Rs 550 crore), although Sterling Group officials did not confirm it. This recent transaction perhaps lacked the element of surprise packed in his earlier deals, as talks with the buyer, Lavazza of Italy, were protracted.

While Barista provided the brand and perhaps the entry interest for Lavazza, Fresh & Honest gives it an existing platform of profits. Fresh & Honest Café was started 10 years back; by March 2004 it was making profits of Rs 12 crore on a turnover of Rs 50 crore. Since then, the number of vending machines has more than doubled (roughly 400 machines get installed every year). At last count, the company had 2,350 vending machines installed, a turnover of close to Rs 125 crore and profits of Rs 30 crore. "Our expertise lies in providing vending machines in places that would do good business and we advise our franchisees and corporate clients on minimum viability requirements," says R. Shivashankar, CEO, Fresh & Honest Café. The company maintains all the machines installed and also provides the raw materials (coffee seeds, tea bags, noodles, etc.). With Sivasankaran's benchmark of getting back at least 10 times the EBITDA (earnings before interest, depreciation, tax and amortisation), Fresh & Honest has been a major contributor to his kitty.

Sivasankaran reportedly purchased Barista Coffee Company from Turner Morrison (65 per cent) and the Tatas (34.31 per cent) for Rs 30 crore and Rs 65 crore, respectively. After Sterling's acquisition, 90 outlets were added to the existing stable taking the total to 175 outlets in India and 12 outlets across the UAE, Sri Lanka and Oman. The additional investments amounted to Rs 120 crore. "The overseas outlets were positive on profits, but overall, the company has just started reporting EBITDA profits," says CEO Partha Duttagupta. 2007-08 is expected to be the turnaround year for Barista.

With Sivasankaran exiting the coffee business, the Sterling Group does not have anything worthwhile in its portfolio except for the Aiwo chain of restaurants for health food conscious people. But there are big forays expected in the wind electricity generation segment. With Sivasankaran, however, you never know what's going to be next on his plate.

Super-growth Ambitions
Cognizant aims to double revenues in 18 months.

Cognizant’s D’Souza: Big plans
From $1 billion to $2 billion in 18 months works out to a compounded annual growth rate of 58.74 per cent, and it's a strike-rate promoters would give an arm and a leg for. It certainly isn't impossible-not at least in the high-growth sector of it services. Cognizant is the company that's attempting this top line caper; that's the guidance it has issued, along with operating margins of 20 per cent (which it is currently achieving). If it does get there, it would have grown faster than Infosys, which took 23 months to move from $1 billion to $2 billion. For its part, Cognizant crossed the $1 billion mark in 12 years, as against Infosys, which took 23 years.

Now for the caveats: Cognizant is young (it was started in 1994; Infosys in contrast is 26 years old); it has a multinational parent in Dun&Bradstreet, and is listed on the Nasdaq in the US; and is headquartered in that country (although it has a development centre in Chennai), thereby enjoying proximity to its client base. In its defence, you could argue that Cognizant is doing the same thing that Infosys, Wipro et al are: Leveraging the India advantage of cost and quality.

Traditionally, Cognizant has been focussed on a limited number of geographies, industry verticals, customers and solutions and has expanded this each year. North America contributes the major chunk of revenues (86 per cent), financial services is its mainstay (with a 48 per cent contribution) and application outsourcing brings in over 90 per cent of revenue. "Strategic investments in these areas have resulted in us winning marquee customers, resulting in higher growth and market leadership," says Francisco D'Souza, President & CEO, Cognizant. What's more, financial services grew by 54 per cent and applications outsourcing (through repeat business) grew by 96 per cent, validating the bread and butter strategy. The company added 14,500 professionals (or 60 per cent of its headcount) in the calendar year 2006 and ended the year with 38,800 professionals (Infosys has 69,432 employees). While 75 per cent of its headcount is in India, over 85 per cent of its global hiring gets done out of India.

But to hit $2 billion by January 2008-Cognizant touched $1 billion in the June-ended quarter of 2006-would call for a new strategy and D'Souza is set to make the big shift. "The services value chain is becoming global much like the manufacturing supply chain. This will involve a paradigm shift from labour arbitrage to intellectual arbitrage," he says.

Win-Win Connection
Vodafone has a partner, and Essar a nice bail-out option.

ONGC’s Sharma: Fair play
Arun Sarin couldn't stop smiling last fortnight, after the Foreign Investment Promotion Board (FIPB) was well on its way to clearing Vodafone's takeover of Hutchison Telecom's majority stake in Hutch-Essar. The CEO of the world's largest mobile phone operator had ample reason to be content: Vodafone finally got management control of an Indian telecom company. At the same time, Sarin also managed to allay the fears that the Ruias of Essar-33 per cent stakeholders in the JV-had about Vodafone's entry. Not only has Essar Group Vice Chairman Ravi Ruia been anointed Chairman of the JV, to be called Vodafone Essar, the Ruias have the option to sell their stake in the JV to Vodafone for $5 billion (Rs 22,000 crore). This suits Vodafone too, as it has sidestepped the hassle of looking out for a new ally in India.

Sarin has set out some serious targets for the newly rechristened company, which will soon sport the Vodafone logo. He's aiming to be the largest Indian wireless provider by 2010 with a market-share of 22-25 per cent, a marked increase from the current share of 16-17 per cent. However, the competition is not fazed by such statements, "One foreign-owned operator has sold out to another one, I don't see anything changing much," says Sanjeev Aga, Managing Director, Idea Cellular. "Hutch was a great competitor and I expect Vodafone to be tough competition as well, but nothing we haven't seen before," adds Sunil Mittal, Chairman, Bharti Enterprises.

Significantly, Vodafone recently signed a memorandum of understanding (MoU) with Bharti-Airtel to share infrastructure, but now with Essar on board, the MoU might have to be revisited, as Essar, too, has a company that provides such services. "It is only a MoU, and nothing has been finalised yet," is how Sarin put it, although he did clarify that the fastest way for operators to reach deep into interior India would be to share resources.

"I expect Vodafone to be very strongly focussed on the rural markets," says Neeraj Aggrawal, Director, Boston Consulting Group. Sarin, who plans to bring in "really low-cost" handsets to India from ZTE of China in the current year itself, wants to make "affordability a non-issue." However, other operators and particularly handset manufacturers such as Nokia are skeptical about the low-cost handset model. "People also want their phones to offer them some degree of features as well as a social image, even in rural India, and really low-cost handsets will do neither," D. Shivakumar, Managing Director, Nokia India explains.

Whether low-cost handsets work or not is still to be seen, but Vodafone is serious about India, after putting down serious amounts of money-all of $11.1 billion (Rs 48,840 crore)-to enter the country. But Sarin does have one man to thank. "The first call that Arun made was to me. He said 'I want to buy this (Hutch)', I said 'Go', he was stunned," Mittal says, "because he needed my approval." Hopefully, Mittal will not end up regretting his decision.